Real-Time Forecasting and Political Stock Market Anomalies: Evidence for the United States
Financial Review, Vol. 43, Issue 3, pp. 323-335, August 2008
13 Pages Posted: 14 Jul 2008
Using monthly data from 1953 to 2003, we apply a real-time modeling approach to investigate the implications of U.S. political stock market anomalies for forecasting excess stock returns in real-time. Our empirical findings show that political variables, chosen on the basis of widely used model-selection criteria, are often included in real-time forecasting models. However, political variables do not contribute systematically to improving the performance of simple trading rules. For this reason, political stock market anomalies are not necessarily an indication of market inefficiency.
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